Hertz Global Holdings Inc.'s proposed acquisition of Dollar Thrifty Automotive Group Inc. could reduce the combined rental-car company's new-car purchases in the near term but lead to more vehicle purchases eventually.
And the merger "should have no impact" on Hertz's operations at auto dealerships, a Hertz spokesman said. Hertz rents cars and trucks out of dealerships from approximately 250 locations across the United States.
"We will continue to expand our off-airport business," he said. "Partnerships with dealers will remain an important element in our growth strategy."
The two companies say they expect synergies to produce annual savings of $65.6 million in fleet costs, in part through sharing of vehicles across rental brands. That could mean fewer purchases in the near term.
In discussing potential savings during a conference call with analysts, Hertz CEO Mark Frissora and Dollar Thrifty CEO Scott Thompson said the merged company could share vehicles across its brands. Hertz, which specializes in business renters, does a majority of its business on weekdays. Dollar Thrifty, which caters more to leisure travelers, does more business on weekends.
Still, the spokesman said, "We want to grow the combined businesses. In our business, that means buying more cars."
The spokesman said it is "premature" to talk about changes in auto vendors.
"As far as specific [auto companies] and what our strategies are, I don't think we've had any discussions on that," he said. Hertz's top three suppliers of vehicles are General Motors, Nissan and Toyota. Dollar Thrifty's are Ford, Chrysler and GM.
In 2011, Hertz's fleet had an average of 615,600 vehicles, while Dollar Thrifty's fleet had an average 107,154, the companies said.
Chris Brown, executive editor of Auto Rental News, a publication that covers the auto rental industry, said the merger would give Hertz more buying power and leverage to negotiate better prices from auto companies.
But he doubts that Hertz would cut its number of auto vendors. There has been a move within the rental industry over the last six years or so to diversify fleets, he said.
"The diversity of fleet is needed for their locations and their consumers," he said. "There is some crossover," he said, noting that both Hertz and Dollar Thrifty buy vehicles from GM. "More dollars to buy means better pricing for Hertz."
Under the merger deal, Hertz would acquire Dollar Thrifty for about $2.3 billion in cash. In the conference call, Frissora, the former CEO of supplier Tenneco Inc., said he expects the deal to be completed in October pending clearance from the Federal Trade Commission.
The merger would make Hertz the second-largest U.S. rental car company, behind Enterprise Holdings and way ahead of third-place Avis Budget Group.
To satisfy the FTC and antitrust laws, Hertz will sell its Advantage Rent A Car business to Franchise Services of North America and Macquarie Capital. Some other Dollar Thrifty assets and associated airport concessions also will be divested, Frissora said.
Franchise Services, of Calgary, Alberta, and its subsidiaries own U-Save Car & Truck Rental, U-Save Car Sales, Rent-a-Wreck of Canada, Practicar, Auto Rental Resource Center, Xpress Rent A Car and Peakstone Financial Services.